Australian Dollar Advances Amid Stock Gains, Bets on BOJ

By Masaki Kondo -
Nov 19, 2012

The Australian dollar rose against
most of its major peers after President Barack Obama expressed
confidence that the U.S. can avoid the so-called fiscal cliff,
boosting stocks and buoying demand for higher-yielding assets.

The so-called Aussie reached its strongest level in more
than six months against the yen as the Bank of Japan (8301) meets today
and tomorrow with political pressure mounting for more monetary
stimulus. New Zealand’s dollar, known as the kiwi, maintained an
advance after data showed its services industry expanded at the
fastest pace in almost five years.

“The Australian and New Zealand dollars are being bought
as risk assets, so they tend to be correlated with stock
moves,” said Hideki Shibata, a senior strategist for rates and
currencies at Tokai Tokyo Research Center Co. “Amid the broader
sell-off of the yen, the Aussie and kiwi are being chosen as
higher-yielding currencies.”

Australia’s dollar climbed 0.3 percent to $1.0369 as of
5:35 p.m. in Sydney. It rose 0.3 percent to 84.31 yen after
earlier touching 84.51, a level unseen since April 27. The New
Zealand dollar traded at 81.34 U.S. cents after gaining 0.4
percent to 81.27 on Nov. 16. It fetched 66.13 yen from 66.08.

Obama said in Bangkok yesterday that he is “confident”
that the U.S. can get its fiscal situation dealt with. Before he
left for Asia, he began a new round of deficit-reduction talks
with top Republicans and Democrats to avoid the combination of
$607 billion in automatic tax increases and spending cuts, known
as the fiscal cliff, that threatens to throw the country into a
recession next year.

Australia’s Bonds

Australia’s bonds fell, pushing the yield on the benchmark
10-year note up by six basis points, or 0.06 percentage point,
to 3.09 percent. The rate declined to a one-month low of 3.02
percent on Nov. 15.

Japan’s political leaders are preparing for elections on
Dec. 16 following last week’s dissolution of the lower house of
parliament. Shinzo Abe, the opposition leader and an advocate of
more aggressive monetary easing, has an approval rating of 37
percent, compared with 25 percent for incumbent Yoshihiko Noda,
the Nikkei newspaper said, citing a survey taken between Nov. 16
and 18.

Bank of New Zealand and Business New Zealand said today
that their Performance of Services Index for the nation jumped
to 57.4 in October, the highest since November 2007, from 49.9
in September. A reading above 50 indicates expansion.

Futures traders increased bets that the Australian dollar
will strengthen, figures from the Washington-based Commodity
Futures Trading Commission showed. The difference in the number
of wagers by hedge funds and other large speculators on an
advance in the Aussie compared with those on a drop -- so-called
net longs -- was 68,146 on Nov. 13, the most since Sept. 25, and
up from 60,317 a week earlier.